Independent furnace closure supports abatement; penalty under compounded levy rules is discretionary, not mandatory.

Separate registration, independent electricity connections, distinct production records and separate capacity determination meant each furnace was treated as an independent unit under the compounded levy scheme, so closure of one furnace with advance intimation satisfied the abatement condition and rejection on the ground that the entire factory had not closed was unsustainable. Penalty under Rule 96ZO(3) was construed as a maximum penalty provision, not a compulsory minimum, so the levy of penalty remained discretionary. On the facts described, deletion of penalty was upheld because the payment delay arose in the context of a pending abatement claim.

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Issues: (i) Whether abatement under Section 3A(3) of the Central Excise Act, 1944 was admissible when only one of two independently functioning furnaces was closed; (ii) Whether penalty under Rule 96ZO(3) of the Central Excise Rules, 1944 was mandatory or discretionary.

Issue (i): Whether abatement under Section 3A(3) of the Central Excise Act, 1944 was admissible when only one of two independently functioning furnaces was closed.

Analysis: The furnaces were found to have separate capacity determination, independent electricity connections, separate production records, and separate departmental registration. On those facts, each furnace was treated as an independent unit for the purpose of the compounded levy scheme. The closure of one such unit, with advance intimation to the Department, satisfied the statutory requirement for abatement and the rejection on the ground that the entire factory had not closed was unsustainable.

Conclusion: Abatement was correctly allowed in favour of the assessee.

Issue (ii): Whether penalty under Rule 96ZO(3) of the Central Excise Rules, 1944 was mandatory or discretionary.

Analysis: The penalty provision was construed as providing a maximum penalty rather than a compulsory minimum penalty. Since the delay in payment arose in the context of a pending abatement claim, the facts did not warrant interference with the Tribunal's deletion of penalty.

Conclusion: Penalty under Rule 96ZO(3) was discretionary and not mandatory, and its deletion was upheld in favour of the assessee.

Final Conclusion: The appeal failed on both issues, and the Tribunal's order granting abatement and deleting penalty was sustained.

Ratio Decidendi: Where a furnace operates as a separately registered and independently maintained unit, its closure may satisfy the requirement for abatement under the compounded levy scheme, and penalty under Rule 96ZO(3) is not mandatory but lies in discretion within the prescribed maximum.

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